Real estate funds in the housing crisis

As part of a study by the rating agency Scope on the effects of price declines in residential real estate on open-ended real estate funds, Sonja Knorr, specialist for real estate funds at Scope, came to the conclusion that the products are currently hardly affected by corrections in price levels. The FAZ reported on this. Although there are markets that are affected by potential for devaluation in the long term, these are commercial properties that are influenced by home offices, as well as second-class locations and sustainability profiles. The core properties that dominate real estate funds, which are often office properties in urban locations, are stable and less affected by price declines. However, it cannot be ruled out that individual funds will have to be temporarily closed. At least this year, according to the article, the inflow of funds should definitely remain positive: the BVI fund association reported an additional investment volume of 1.31 billion euros up to and including August - a lot, but significantly less than the 4.72 billion euros of the previous year. In addition, the BVI stated that the share of one percent of residential properties in open real estate funds in 2006 has increased to ten percent by 2023. Knorr associates this with the trend towards home offices, which is leading to a falling need for office space: the focus is on fewer but higher quality spaces. For retail properties, Scope expects further rental price reductions and losses due to a lack of shopping. In any case, valuation delays caused by expert reviews would lead to price uncertainty, which would not always reflect negative valuation effects or rising rents in a timely manner, which is why declining returns can be expected. Nevertheless, Scope comes to the conclusion that real estate funds can make a contribution to diversification despite their reduced attractiveness compared to bonds.